Price Targeting and Error Correcting RAM
Linus Torvalds blames Intel for the lack of Error Correcting Checksum (ECC) RAM in consumer desktops and laptops. But what is the deeper reason?
Arstechnica just wrote an article: Why don’t PCs use error correcting RAM? “Because Intel,” says Linus.
Why is this a problem? Failure in RAM is a key cause of things such as bit-rot, where a single byte going wrong in say your JPEG family pictures causing the whole image to become corrupted and unreadable. As someone interested in saving family photos and videos long term, this is something that has bothered me a lot about consumer PCs.
Anyway this story is not really about the problem of ECC RAM, but about why companies such as Intel deliberately make consumer products worse. This is not a problem unique to RAM at all. In fact it is part of a much larger problem existing in any capitalist system, caused by something called “price targeting.”
What is Price Targeting
Price targeting is the outcome of the constant struggle in the market to find the right price according to supply and demand. If a seller offers his goods at high price, he makes a good profit on each item sold, but he will sell far fewer products. On the other hand if he sells at a very low price, he will sell a lot more but get much less profit per item sold.
This presents a difficult conundrum. What a seller wants is to sell their products at as high price as possible to consumers with deep pockets who don’t mind paying a high price. At the same time they don’t want too loose sales to price conscious customers. So they want to sell to a lower price to those customers.
However a seller cannot put up an item for sale and write:
$100 per cup of coffee for rich suckers and $10 per cup for the poor and price conscious.
Instead they must find a sneaky way of doing the same thing. The rick employed is to add small things that only the affluent care about. But more often they deliberately hamstring or worsen their product to scare away more affluent customers.
A good example of this is from the 1800s Britain in the transport sector. The second class wagons had no roof so you would get rained on during bad weather. Of course adding a roof cost almost nothing, so why did they not do it? Because they needed a way to scare the more affluent travelers into buying a first class ticket that didn’t really offer much of an advantage
IBM sold printer where they deliberately destroyed part of the controlling chip to make it work worse. Why? Because they needed a way to sell the printer to those who could pay less. However spending money to design a cheaper printer would be costly. Hence it was better to basically sabotage their normal printer so it would work worse and then sell that to people who could pay less.
This way they could charge a premium to affluent consumers, while at the same time being able to sell their printers to consumers with less money.
In super markets what may consumer do is to change the packaging for identical products. E.g. the same canned tomatoes could get packaged with different labels. The ones intended for consumers with more money to spend would have a beautiful look tomatoes on the label. The “cheap” tomatoes which are in fact identical would have a crappy looking label on to make them look like an inferior product. The cans would get placed far down, for up or anywhere where they cannot be easily spotted. The expensive kind would be placed right at the level where most consumers would spot them instantly.
This is the same way sales work. Regular consumers with enough money buy at any time. However the stores know that they can reach them more price conscious consumers by having sales on the normal products. In those days they sell more to the price conscious consumers. It is the same rational behind coupons. The most price conscious consumers will cut them out and get products cheaper. It is the equivalent of making open roof train cars. The stores want to make the act of buying cheap more miserable. They want to scare you away from doing it so you pay the higher price. It is all about creating elaborate hoops to jump through.
In the old days price targeting was handled through haggling. The seller would sell their products at a high price and the buyer with more cash would simply not bother to put as much energy into the haggling. Today sales, coupons, “money back” serves the same purpose.
So Why is Intel Not Adding ECC to RAM?
Thus now you have a better understanding of why Intel is not adding ECC. It is essentially about scaring customers buying severs from buying cheap consumer RAM. Intel know the companies have deep pockets and can pay more. So they want to set prices high for their chips. But if consumer CPUs have support for ECC, then companies building server could save a ton of money by buying consumer CPUs. Intel would loose a lot of money.
Thus like the train companies of old, Intel had to find a way to scare companies away from cheap consumer chips and onto overpriced server chips. The solution was to hamstring consumer CPUs by removing ECC support.
Premium Brands and Bang for the Buck
Price targeting also helps explain why premium brands are so expensive and quality does not increase linearly with price. It is all about getting people insensitive to price to pay as much as possible. Hence premium products will frequently not offer good value. But likewise products aimed at those with minimal cash, may be broken in some crucial way to scare other consumers away from that product. It is why we often find the best value in midrange products.
What To Do About Price Targeting?
There is not much one can do apart from being aware of it. This is simply one of many problems with capitalism. I have covered many of the other problems in previous articles:
- Failures of Capitalism: The Prisoners Dilemma. A thought experiment from Game Theory, explaining important limits to competitive markets based on individual decisions.
- Failures of Capitalism: Incomplete or Asymmetric Information
- Failures of Capitalism: Manufactured Needs and Planned Obsolescence. How products are made to break and how we are induced to consume ever more products regardless of whether we need them or not.
It is easy to give a cynical answer to this, such as “It is better than the other alternatives.” However often this is presented as a false choice. As if we have to pick between unregulated capitalism and some Stalinist hell hole. We don’t. Often as I have written about before we can pick pragmatic solution in between two extremist ideals of how society should work. Social Democracy is on proven solution, although I have not seen Social Democracy in its current incarnation offer a solution to price targeting.
Read more: The Success of Social Democracy.
But this should not stop us from being wiling to to tinker with the system and explore alternatives. Okay I know this seems to veer off far from Intel and ECC, but this wasn’t really a technology article, but a commentary on problems with capitalism. Arstechnica simply spurred me to think about it with their article. I noticed how people seldom talk about these underlying motivations and systems that cause what seems like contradictions to us.